Both the highly leveraged funds collapsed in June 2007. The two portfolio managers misled investors about the exposure of their funds to subprime mortgage-backed securities. In 2008, the SEC charged two Bear Stearns hedge fund managers Ralph Cioffi and Matthew Tannin of fraud. A federal court district Judge threw out a guilty verdict relating to an oil company controlled by Platinum Partners. Mark Nordlicht was acquitted of all charges related to defrauding hedge fund investors. However, an initial guilty verdict on unrelated charges was immediately thrown out. In June 2019, Nordlicht was originally found guilty of defrauding an oil company controlled by Platinum Partners. In December 2016, Mark Nordlicht was arrested for perpetrating a $1 billion Ponzi-like fraud. Or at least thatвЂ™s what the hedge fund wanted its investors to believe. Mark Nordlicht-led Platinum Partners was consistently delivering market-beating returns. Lancelot Investment filed for Chapter 11 bankruptcy in 2008. Petters also defrauded many other hedge funds. But the hedge fund failed to validate the purchase orders and inventory that PettersвЂ™ businesses had used as collateral for the loans. Lancelot lent $1.5 billion of its $1.8 billion AUM to Petters. Illinois-based Lancelot Investment Management lost more than $1.5 billion in a Ponzi scheme orchestrated by Minnesota businessman Tom Petters. By the end of November 2008, its assets vanished into thin air. But it made a huge unhedged bet on mortgage-backed securities. Parkcentral assured investors that it would not employ more than 5% of assets to any single strategy. It seemed like a well-managed hedge fund. 6- Parkcentral Global Hub, 2008Д«ermuda-chartered hedge fund Parkcentral had about $2.5 billion in AUM right before the 2008 financial crisis. When the SEC launched its investigation, the hedge fund was forced to sell the illiquid penny stocks at dirt cheap prices. It was investing primarily in penny stocks, which are relatively easier to manipulate. The Securities and Exchange Commission found in 2003 that Michael Lauer-led Lancer Management Group was inflating the performances and net asset values of three of its funds to pump up valuations and attract investors. Lancer Management was one of the biggest hedge fund blow ups of all time. Sowood had to shut shop and sell its positions to Ken GriffinвЂ™s Citadel. About $350 million of HarvardвЂ™s investment was wiped out. The hedge fund lost about half of its $3 billion in the month of July 2007 amid the credit market turmoil. Harvard had invested $500 million in Sowood. Sowood Capital was a Boston-based hedge fund run by Jeffrey Larson, who had previously served as HarvardвЂ™s endowment manager. Interestingly, he had launched the hedge fund only one year prior. David Askin was barred from the securities industry for two years.

Askin investors lost almost all their money. His big bet backfired when the Federal Reserve began raising short-term interest rates dramatically in February 1994 for the first time since 1989.

Its founder David Askin invested almost all the money in mortgage-backed securities. 9- Askin Capital Management, 1994ДЄskin Capital had an estimated $600 million between its three hedge funds.

He was also sentenced to 20 years in prison. In 2011, Baker was ordered to pay $155 million in restitution, representing the outstanding losses to investors. Philip Baker was also found guilty of misappropriating at least $30 million of investorsвЂ™ money for his own use and for another Lake Shore director. In reality, Lake Shore was incurring millions of dollars in trading losses, which it was hiding from investors. Lake ShoreвЂ™s managing partner Philip Baker had raised $294 million from 900 investors worldwide by promising annual returns of as high as 55% between 20. 2- Long-Term Capital Management, 1998Д¬hicago-based hedge fund Lake Shore shut its shop in 2007.

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